But ministers said the costs of subsidies for extra back-up storage could reach £750m over a decade and claimed this would far outweigh any potential benefits.

Michael Fallon, the energy minister, told the Telegraph he did want to see more small rapid-response storage facilities built and believed companies would invest in them now government had clarified the policy.

"We don’t need to waste bill-payers' money on extra subsidies for investment that the market can deliver," he said.

Britain has capacity to hold about 15 days’ worth of national gas demand in storage – much lower than storage levels elsewhere in Europe and in the US.

In March, the UK gas prices trebled when a key import pipeline was temporarily closed, with gas storage facilities almost empty after the cold weather, fuelling fears Britain was running out of gas and leading to calls for more storage to be built.

Ministers considered whether to intervene in the market but have now concluded that the market is working well.

Centrica said it was "disappointed" by the decision. The company, which owns Britain’s existing long-term gas storage site at Rough, off the Yorkshire coast, has lobbied for subsidies to convert the empty Baird gas field off Norfolk to another site of almost the same size.

But Mr Fallon rejected the British Gas owner’s demands, saying: “I am not prepared to see fuel bills rise further just to give Centrica additional subsidy.”

Sam Laidlaw, Centrica chief executive, told the Telegraph in July that subsidies would be “prudent” as an “insurance policy” to prevent storage levels falling “uncomfortably low” as they had done in March.

“The risk is that if you have a situation where you are struggling for security of supply, you have to pay the highest price in the world to bring LNG [liquefied natural gas] to the UK. That could mean very significant additional costs on customer bills,” he said.

Mr Fallon dismissed this claim: “That’s always the argument of those who want subsidies, but all you do know for certain is that you have paid an enormous amount [in subsidy]. You can’t be sure you have eliminated spikes in prices.”

Reports that Britain was close to running out of gas were "somewhat misleading", the minister said. "They certainly don’t justify spending nearly three-quarters of a billion pounds on one or two massive projects which in themselves would not necessarily rule out higher prices.

"Far better to let the market provide with a series of small-scale fast cycle projects that can be brought on relatively quickly and are far more adaptable.

“This is moving energy policy back towards the market."

Large, seasonal storage facilities rely on gas being cheaper in summer, when it is pumped into the field, allowing it to be extracted and sold for a profit when demand drives prices higher in winter. But the difference between summer and winter prices has narrowed in recent years making investment unattractive without subsidy.

However, smaller storage plants that can fill up more quickly and take advantage of shorter-term fluctuations in the price may be more viable. Two storage facilities opened last winter and two more are being built.

Industry was divided on whether more storage was needed.

A spokesman for SSE, which owns a smaller storage plant and is considering building another, said: "We fully support the Department of Energy and Climate Change's decision not to intervene in the UK gas storage market, since we also believe there is currently sufficient gas storage capacity and alternative supplies of gas to ensure the UK is able to secure the gas it needs.

"Any intervention has to be balanced against the unintended consequences that could impact upon the UK's existing gas storage facilities and the ultimate cost to consumers of supporting this intervention."

Laura Cohen, chief executive of the British Ceramic Confederation, whose members use a lot of energy, criticised the government's decision. "We can’t just wait and hope the market works," she said.

"Gas storage facilities take a long time to get built. We are starting to lose coal-fired power stations now and getting a lot more intermittent wind on the system - both of which are going to require more gas-generated electricity supply. There’s going to be quite a lot of pressure on gas for electricity generation as well as for heating."

She said BCC members were generally willing to pay extra to subsidise new seasonal storage in order to "avoid the harmful effects of volatility".

Mr Fallon said Britain's gas supplies were secure "at the moment" even without more storage, but that government still wanted to "encourage some more storage".

"We are not specifying how much more we want but we are clearing the way for the market to provide some more if it is commercially in their interest," he said.